Petroleum Measurement Regulations, Statutory Instrument no. 4 of 2023

1. Objectives.

2. Application. Part Il — Duties AND OBLIGATIONS OF LICENSEES AND PERMIT HOLDERS

3. Duties of licensees and permit holders.

4. Duty to provide information. Parr If — MEASUREMENT STANDARDS AND METHODS Measurement standards. OS Classes of dynamic measurement. Calibration and traceability. Oo: Reference conditions. 3 Bypass of measurement system. 2 Measurement methods. Part IV —- DesiGn oF METERING SYSTEM AND ITS OPERATION ll. Metering System Design.

12. Testing, calibration and inspection of measurement system.

13. Operation and maintenance of measurement system.

14. ‘Operations management and supervision metering systems.

15. Measurement loss and shrinkage. Part V — MISCELLANEOUS PROVISIONS

16. Powers to make Guidelines, etc.

17. Fees.

18. Offences.

19. Interpretation.

20. Citation. SCHEDULE B 23 S. I. No. 4 of 2023 PETROLEUM INDUSTRY ACT, NO. 6, 2021 PETROLEUM MEASUREMENT REGULATIONS, 2023 [9th Day of February, 2023] Commence- ment, In exercise of the powers conferred on it by sections 33 and 106(1) of the Petroleum Industry Act, No. 6, 2021 (“the Act”) and all other powers enabling it in that behalf, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (“Authority”), make the following Regulations — Part | — OBJECTIVES AND APPLICATION

1.—(1) The objectives of these Regulations are to — Objectives. (a) regulate and ensure accurate measurement and allocation of natural gas or its derivatives, crude oil or its derivatives, condensate, petroleum liquids, petroleum products, or any other form of petroleum liquids ; (>) determine the basis for calculating revenue accruing to government, licensees, contractors and other parties in midstream and downstream petroleum operations ; and (c) provide sanctions and penalties for failure to comply with these Regulations.

2. These Regulations shall apply to static and dynamic measurements Application. for natural gas or its derivatives, crude oil or its derivatives, condensate, petroleum liquids, petroleum products, or any other form of petroleum liquids. Part I] — Duties AND OBLIGATIONS OF LICENSEES AND PERMIT HOLDERS

3.—(1) A licensee or permit holder to whom these Regulations apply Duties of shal] — licensees and permit (a) ensure that measurement systems are installed at the appropriate holders measurement points in midstream and downstream operations : (b) ensure that the provisions of these Regulations, guidelines or any other directive from the Authority are complied with: (c) ensure that its contractors, employees, agents, and any person acting for the licensee or permit holder comply with these Regulations, guidelines, or any other directives issued by the Authority; (d) appoint in writing, a competent person to be responsible for metering and allocation systems, and notify the Authority of the appointment and any subsequent change, not later than 72 hours of such appointment or change; (e) ensure that a person engaged in metering activities possesses the requisite qualifications and competences to perform the activities: B 24 (f) ensure that a contractor or sub-contractor engaged in metering activities is registered with the Authority. and issued with an appropriate permit: (g) ensure that metering and allocation systems are designed, fabricated, inspected, tested, and installed in accordance with these Regulations and guidelines issued by the Authority : (i) ensure that measurement systems report, records and data are maintained as prescribed by the Authority for audit ; and (/) ensure that its measurement operations are undertaken with valid and appropriate licences. permits or authorisations. (2) Where a licensee or permit holder fails to install or operate measurement system at appropriate point, the Authority shall licence a third party to install or operate a measurement system, and the licensee or permit holder who has failed to instal! or operate the measurement system shall be responsible for the costs incurred by the third party to install such measurement system. Duty to 4.—(1) A licensee or permit holder shall provide the Auchority with provide information or data on — information. (a) annual performance of measurement system ; (5) annual maintenance plan and record for previous year ; (c) malfunction of measurement system ; (c/) annual recertification notice ; (e) annual totalizer measurement ; (7) annual actual measurement ; (g) report of maintenance work on flow computer and other metering system components ; (h) petroleum liquids and natural gas handling agreements, including cargo loss claim ; and (i) the performance ofa newly installed metering system not later than three months after installation. (2) The Authority may direct a person to provide information or data on any measurement operation and such person shall! provide the information or data in the prescribed manner within the time frame stipulated in such directive, Part Il] — Measurement STANDARDS AND METHODS Measurement 5. The Authority shall approve standards and recommended practices standards. to be used in the design, construction, modification, upgrade, operation, and maintenance of a measurement system. B 25

6.—(1) The classes of dynamic measurement based on their purpose Classes of of deployment are specified in the First Schedule to these Regulations. dynamic measurement. (2) The uncertainty limit data analysis shall be developed for petroleum measurement systems within 95% confidence level in accordance with recognised standards and the uncertainty limits shall be prescribed by the Authority in guidelines. (3) The points of deployment for dynamic measurement shall be for — (a) custody transfer ; (6) allocation; (c) fuel gas ; or (d) flare gas. (4) Notwithstanding the provisions of subregulation (3) of this regulation, measurement methods in crude handling agreements, crude transportation agreements, gas sales or supply agreements, gas transportation agreements, and other commercial agreements for midstream and downstream petroleum operations shall be as approved by the Authority.

7.—(1) The frequency of calibration of measurement systems shall be Calibration as prescribed in a guideline issued by the Authority. and traceability. (2) A licensee or permit holder shall ensure that measurements and calibrations made under these Regulations have traceability to national or international measurement standards. (3) A licensee or permit holder shall ensure that an instrument used for calibration has traceability to national or international measurement standards . (4) A third-party measurement laboratory used to calibrate equipment covered by these Regulations shall — (a) be accredited in accordance with national and international recognised standards ; and (6) have a documented uncertainty equal to or better than those set out in these Regulations. (5) A licensee or permit holder shall ensure that a laboratory analysis of the composition or quality of natural gas or its derivatives, crude oil or its derivatives, condensate, petroleum liquids, petroleum product s or any other form of petroleum liquids for custody transfer and allocation purposes is carried out by an accredited measurement laboratory and witness ed by the Authority.

8.—(1) The reference conditions for temperature and pressure to Reference determine standard volume is 60 °F and 14.696 psia (101.325 kPa) for crude conditions. oil and condensate. (2) Areference pressure other than 101.325 kPa may be used for natural gas liquid and liquefied petroleum gas. “oO B 26 (3) A reference temperature and pressure of 15°C and 101.325 kPa may be used for petroleum products and liquetied natural gas. By-pass of 9. The by-pass of a meter bank, dispensing pump. loading gantry. or Measurement provision for reverse flow through the meter bank ofany measurement system system. is prohibited. Measurement 10.—(1) The primary measurement method for determining the methods. quantities of natural gas or its derivatives, crude oil or its derivatives. condensate, petroleum liquids, petroleum products, or any other form of petroleum liquids shall be by dynamic measurement method. (2) Notwithstanding the provisions of subregulation (1) of this regulation, where dynamic measurement method is not applicable. static measurement method shall apply subject to conditions prescribed by the Authority. Parr 1V — DESIGN OF METERING SYSTEM AND ITS OPERATION Metering 11.—(1) A metering system for measuring natural gas or its derivatives, System crude oil or its derivatives, condensate, petroleum liquids, petroleum products Design. or any other form of petroleum liquids shall not be designed without the approval of the Authority. (2) Ameter bank shall be designed to N+1 philosophy and make provisions for proving system. (3) Anapplication for approval under subregulation (1) of this regulation shall be accompanied with — (a) the type of meter selected and selection criteria ; (b) design philosophy ; (c) fluid properties : (/) type of proving method ; (e) location : and (f) project cost estimate. (4) The design and location ofa metering system shall be such that it is easily accessible for condition monitoring, maintenance, replacement, recertification, and repair works. + Testing. 12.1) Alicensee or permit holder shall not procure, fabricate, assemble, a . . calibration integrate, ship, install, modify, or commission a measurement system, sampling and system, proving system, or flow computer without conducting appropriate tests, inspection of measurement calibration, inspection and verification exercises. system, (2) The Authority shall witness the activities stated in subregulation (1) of this regulation. (3) The result ofa test in sub-regulation (1) of this regulation at fabrication shop or site, shall be validated to ensure the system meets the requirements prescribed by the Authority. B27 (4) Measurement systems used for natural gas or its derivatives, crude oil or its derivatives, condensate, petroleum liquids, petroleum products, or any other form of petroleum liquids shall not be approved for shipment into Nigeria, without meeting the following minimum conditions— (a) meters are tested and calibrated ; (b) critical equipment are inspected and tested ; (c) sampling devices are tested and calibrated ; and (d@) proving systems are inspected, tested and calibrated. (5) Measurement systems used for natural gas or its derivatives, crude oil or its derivatives, condensate, petroleum liquids, petroleum products, or any other form of petroleum liquids installed in a vessel shall not be approved for sailing into Nigeria, without meeting the following minimum conditions — (a) meters are tested and calibrated ; (b) critical equipment are inspected and tested ; (c) sampling devices are tested and calibrated ; (d) cargo tanks are inspected and calibrated ; and (e) proving systems are inspected, tested and calibrated. (6) The Authority shall be present when an equipment or appliance for measuring or weighing natural gas or its derivatives, crude oil or its derivatives, condensate. petroleum liquids, petroleum products or any other form of petroleum liquids is being calibrated, recalibrated, tested, compared, measured or weighed against a standard approved by the Authority. (7) Where a licensee or permit holder fails to test or recertify a measurement system, the Authority may, in addition to any penalty under these regulations, direct a third party to test and recertify such measurement system and the licensee or permit holder who has failed to test or recertify the measurement system shall be responsible for the costs incurred by the third party directed by the Authority to carry out the test or recertification.

13.—(1) A licensee or permit holder shall not operate a measurement Operation system without the authorisation of the Authority. and maintenance (2) A licensee or permit holder shall not commence the maintenance of of a measurement system without the approval of the Authority. measurement system. (3) A licensee or permit holder shall, in the course of operating a measurement system, keep performance records of metering system, sampling system, proving system, dispensing system, flow computing system, and static measurement system in accordance with the requirements and conditions prescribed by the Authority. (4) A licensee or permit holder shall not delete the records of any measurement system without the prior approval of the Authority. B 28 (5) A licensee or permit holder shall keep and submit periodic measurement system data when requested by the Authority. (6) All system diagnosis, modification, upgrade, and maintenance shall not be carried out without the approval of the Authority. (7) A licensee or permit holder shall not make any alterations in the measuring or weighing equipment or appliances, including prover loop detector switch,or in the method of measurement or weighing without participation and approval of the Authority. (8) A licensee or permit holder shall conduct meter linearity annually and the report of such exercise shall be approved by the Authority. (9) A permit holder shall conduct master meter linearity in the manner prescribed by the Authority. (10) A licensee or permit holder shall conduct uncertainty analysis for metering system in the manner prescribed by the Authority. Operations 14. The Authority shall have power to witness and supervise the management development of metering systems through — and supervision (a) meter selection ; of metering (6) conceptual design ; systems. (c) detailed engineering; (d) verification of accuracy of sampling systems, flow computers, gas chromatograph, proving systems and other critical components ; (e) fabrication and inspection ; and (f) factory and site acceptance tests. Measurement 15.—(1) Petroleum allocation-:methodologies shall be approved by the loss and Authority prior to implementation. shrinkage. (2) Cargo loss or shrinkage complaints shall be reported to and investigated by the Authority. (3) A licensee shall not apply a shrinkage, measurement loss or decanting method to natural gas or its derivatives, crude oil or its derivatives, condensate, petroleum liquids, petroleum products or any other form of petroleum liquids without the prior approval of the Authority. Part V — MISCELLANEOUS PROVISIONS Powers to 16.—(1) The Authority may issue guidelines, directives, notices and -make metering codes for the effective implementation of these Regulations. Guidelines. ete. (2) Where no specific provision is made in these Regulations for any part of natural gas or its derivatives, crude oil or its derivatives, condensate, petroleum liquids, petroleum products or any other form of petroleum liquids measurement operations in Nigeria, subject to the approval of the Authority, practices conforming with international best standards shall be observed.

17. The fees in the Second Schedule to these Regulations. shall be Fees. applicable to metering and measurement operations in midstream and downstream petroleum operations in Nigeria.

18.—(1) A person who — Offences. (a) fails to obtain a licence, permit or authorisation required under these Regulations ; : (b) fails to provide information required under these Regulations ; (c) makes a false declaration to the Authority or wilfully furnishes information so required which is false or insufficient : or (d) fails to comply with the provisions of these Regulations or any directive or condition of any permit or licence issued under these Regulations ; may, without prejudice to the sanctions, fines and penalties contained in the Act, be liable to the relevant administrative penalties contained in the Third Schedule to these Regulations, and any licence, permit or authorisation granted to that person may be suspended or revoked. (2) Where no specific penalty for an offence under these Regulations is provided in the Third Schedule to these Regulations, the Authority may impose an administrative penalty not exceeding USD 250,000.

19. In these Regulations — Interpretation. “accuracy” means the ability of the measurement instrument to indicate value closely approximately the true value ; “Act means the Petroleum Industry Act, No 6, 2021 ; “accredited laboratory” means a laboratory recognised and authorised by the Authority to perform calibration of measurement equipment or devices ; “allocation” means an allotment of petroleum, petroleum liquids and natural gas within production facilities, pipelines, processing facilities, and storage facilities ; “allocation system” means methods, measurements and estimates used for the allocation of petroleum and appurtenant documentation and procedures ; “Authority” means the Nigerian Midstream and Downstream Petroleum Regulatory Authority ; “barrel (bb1)” has the meaning ascribed to it in the Act ; “calibration” means the process or procedure of determining the exact volume, capacity, or partial capacity of a standard capacity measure ; “competent person” means a person appointed, with the approval of the Authority, by the manager in writing as a reliable person capable of exercising overall general supervisory responsibility in ensuri ng compliance with the provisions of these Regulations ; B 30 “critical component” means component of the measurement or metering system that has direct impact on the functionality or output of the measurement system ; “crude oil” has the meaning ascribed to it in the Act ; “custody transfer” means change in ownership or responsibility irrespective of whether the transfer is within the same parent company or not ; “detector switch” means a device that indicates the passage of a displacer in a prover ; “dynamic measurement” means measurement under a flowing condition using meters ; “factory acceptance test” means a test that is carried out at the fabrication shop or test yard on an equipment before shipment into the country or site ; “fiscal metering” means metering carried out in connection with purchase, sale and the calculation of taxes and royalties ; “flare gas” means natural gas burnt off or vented to the atmosphere ; “flow meter” means a device for a continuous measurement or registration, and display of the amount of petroleum which flows through a pipeline; “gas chromatograph” means a device for measuring gas composition ; “inspection” means examination ofa product, process or installation to assess or determine its conformity with specific or general requirements ; “instrument” means a device used for measurement and calibration ; “International measurement si:andard” means a measurement standard acknowledged and recognised internationally as a point of reference for measurement and testing ; “licensee” has the meaning ascribed to it in the Act ; “linearity” means the total range of deviation of the accuracy curve from such a straight line between the minimum and maximum recommended flow rate ; “metering system” means the meters, prover, instrument part, sampling system, flow computer, and other auxiliary equipment ; “N+]” means the representation of an additional system to serve as * redundancy ; “natural gas” has the meaning ascribed to it in the Act ; “NGN” means Nigerian Naira ; “petroleum” has the meaning ascribed to it in the Act ; “petroleum liquids” has the meaning ascribed to it in the Act ; “petroleum products” has the meaning ascribed to it in the Act ; “permit holder” means holder of a permit issued by the Authority to undertake an activity ; B 31 “proving system” means system for validating the performance of a meter : “repeatability” means the ability ofa meter and prover system to repeat its registered volume during a series of consecutive proving runs under constant operating condition : “sampling device” means equipment used for the collection of fluid sample from a system ; “sampling system” means a system for the collection of sample from the fluid flowing ina pipe ; “site acceptance test” means a test that is done on an equipment at the place of operation during commissioning ; “traceability” means the quality of a measurement result to be linked ta a reference standard through an unbroken chain of calibrations ; “uncertainty” means an interval of value within which the true value is believed to lie within a stated probability ; “USD” means United States Dollars ; and “verification” means provision of evidence that a given equipment conforms to a specified requirement.

20. These Regulations may be cited as the Petroleum Measurement Citation Regulations, 2023. MIRS? SCHEDULE CLASSES OF DYNAMIC MEASUREMENT [Regulation 6(1)| (i) Crass A MEASUREMENT The metering stations used for the delivery of fiscal inetering cf petroleum to customers and where sales contracts are applicable. (2) Ciass B MEASUREMENT The metering stations for the delivery of petroleum in commonly used pipeline systems and where allocation procedures or joint operating contracts apply. (3) Crass C MEASUREMENT : The metering stations for the delivery of fuel gas within the operator’s operating facility or to third party facility. (4) Ctass D MEASUREMENT The metering station for midstream flare gas measurement. (5) Crass E MEASUREMENT The weighing or metering station for petroleum based solid product s measurement. B 33

SECOND SCHEDULE TABLE OF FEES [Regulation \7] SN. Licence, Permit or Authorisation Sertvice Charge Application Fees i Licence to Establish (LTE) a metering system. USD 10.000 USE2.000 2. | Licence to Construct (LTC) a metering system. USD 10.000 USD 2.000 3. | Licence to Operate a LACT/Meter. USD 10.000 N/A 4, | Calibration or Recertification of LACT. USD 2500 N/A 5. | Calibration of Crude Oil Vessel Storage Tank- | USD3500pertank N/A for vessels with capacity > 600.000BBLs. 6. | Calibration of Crude Oil Vessel Storage Tank- USD 300pertank USD Per for vessels with capacity between 20.001 to Tank 600.000BBLs. 7. | Calibration of Crude Oil Vessel Storage Tank- USD 150 pertank N/A for vessels with capacity <= 20.000 BBLs. 8.- | Calibration of Truck. NGN5.000 per tuck N/A 9. | Terminal Storage Tank Calibration or USD 1.500 per tank N/A Recertification (Crude Oil and Natural Gas). 10. | Coastal Vessel Tank Calibration for dead NGN 200,000 per vessel} N/A weight of Vessel between 1-5.000MT (Petroleum products). Il. | Coastal Vessel Tank Calibration for dead NGN 300,000 per vessel] N/A weight of Vessel between 5,001- 20,000MT (Petroleum products). 12. | Coastal Vessel Tank Calibration for dead NGN 400,000 per vessel N/A weight of Vessel between 20,001 and above (Petroleum Products). 13. | Conformity Assessment. USD 10,000 N/A B 34

THIRD SCHEDULE ADMINISTRATIVE PENALTIES [Regulation 18(1) and (2)] S/N, Offence Unit Amount |. | Engagement of non-Authorityaccredited | Per facility USD250,000. ; contractors for fabrication, construction, In—— Se en ; ae , ‘ : : - oi calibration, testing etc. of any critical . a pero ° not more equipment or facility. een Ee ee 2. | Using unapproved tank for storage | Pertank USD5,000. hydrocarbon without approval. 3. | Using unapproved tank for storage or | Pertank NGN1,_009,000. changing tank petroleum product without approval. 4. | Modification, alteration, upgrade, ete. of | Per LACT USD250,000. LACT or measurement System (Export) | System . without authorisation. / . 2. 5. | Modification, repair, alteration of surface or | Per storage greater) USD25,000 tor crude underground hydrocarbon storage tanks | than or equal to oil tanks without approval. 500 barrels 6. | Installation, modification, repair, alteration of | Per storage tank | NGNI,G00,C00. surface or underground petroleum products storage tanks without approval... .....-.- 7. | Failure to allow Authorityrepresentatives | Per !oaded Vessel] US1ID250,060. witness out-turn verification at the port of | or shipment discharge. 8. | Failure to apply the Authoritymethodology | Per facility Monetary equivalent for determination and allocation of crude oil of 36% of the total losses. loss volume allocated at the prevailing oil si Sila Serie asi a pricein USD. 9. | Failure to apply approved new base prover | Per loading USD250,000. volume and meter factor from proving. — * 10. | Non-compliance with installation or tampering } Per Terminal USD109,000. with Authority Locking Device (sea line Valves) on export pipeline, I. Tampering with metering systems or anci!lary | Per Meter USD2,000,600 equipment without approval. 12. Commissioning any critical equipment or | Per equipment USD50,000. facility e.g. valve, compressor, pump, sampler,.|-.. -.--- - - — etc. without approval. 13. | Failure to display on operational tank in | Pertank inservice | USD100,000. Per service “Tank Service”, “Date of Calibration” or operation. Tank and “Next Due Date of Calibration” for Crude oil and Natural Gas. I4 | None display on operational tank*in service | Pertank inservice | NGNI,000,000 “Tank Service’, “Date of Calibration” and or operation Per Tank “Next Due Date of Calibration for Petroleum Products. 15. | Installation of LACT System at Export | Per month USD75,000. terminals or Custody transfer point without approval. 16. | Non-Compliance with frequency of calibration Per Equipment USD5,000 of measurement, dipping tape. Ullage Transmitting Instrument (UT1), Temperature or Pressure Gauges, Transmitters, probes, etc. 17. | Falsification of proving system calibration Per Prover or USD250,060 or meter proving reports. Meter 18. | Failure to calibrate or recertify metering | Per Equipment USD5,000 system ancillary equipment (temperature and pressure gauges, transmitters, etc.). 19. | Failure to Recertify Prover Loop when due. USD175,000 Per Annum 20. | Failure to Recertify Auto sampler when due. USDS50,000 Per Annum 21. | Failure to carry out statutory meter proving Per Meter USD20,000 per when due. proving frequency in addition to any other sanctions by The Authority. 22. | Procurement of critical equipment without NGN 5,000,000 Test. 23. | Measuring petroleum at custody transfer or USD 10,000 and sales points with faulty or uncalibrated measuring seizure of faulty equipment, Ullage Transmitting Instrument (UTI) measuring or metering system. instrument 24. | Measuring petroleum products with fauity.. NGN 100,000 and or uncalibrated ‘Measuring equipment or seizure of faulty Ullage Transmitting Instrument (UTI). measuring instrument 25. | Conducting a factory acceptance test or site USD 250,000 acceptance test of any critical equipment without authorisation and witnessing by officers of the Authority. 26. | Installation or tampering with dispensing | Per pump NGN 500.000 pump or loading gantry without authorisation. | - 27. | Introduction of dead woods, capillary tube | Per storage USD25,000 or false bottom in crude oil storage tanks. greater than orequal to 500 barrels. Mab: at Abuja this 9th day of February, 2023. Encr. FAROUK AIIMED Authority Chief Executive Nigerian Midstream and Downstream Petroleum Regulatory Authority EXPLANATORY NOTE (This Note does not form part of the above Act but is intended to explain its purport) These Regulations seeks to regulate and ensure accurate measurement and allocation of natural gas or its derivatives, crude oi! or its derivatives, condensate, petroleum liquids, petroleum products or any other form of petroleum liquids ; determine the basis for calculatin g revenue accruing to government, licensees, contractors and other parties in midstream and downstream petroleum operations ; and provide sanctions and penalties for failure to comply with these Regulations.